Balance of payments, UK: July to September 2023

• The underlying UK current account deficit excluding precious metals narrowed by £9.1 billion to £19.1 billion, or 2.8% of gross domestic product (GDP), in Quarter 3 (July to September) 2023.

• The UK current account deficit, when trade in precious metals is included, fell to £17.2 billion, or 2.5% of GDP in Quarter 3 2023.

• The total trade deficit excluding precious metals narrowed to £7.1 billion (1.0% of GDP) in Quarter 3 2023, as the goods deficit narrowed to £46.2 billion, and the services surplus expanded to £39.1 billion.

• The primary income account deficit narrowed to £7.1 billion, or 1.0% of GDP, in Quarter 3 2023 as a result of credits increasing more than debits.

• The UK recorded a net financial inflow of £20.8 billion in Quarter 3 2023, down from a £26.1 billion inflow the previous quarter.

• The UK's net international investment liability position narrowed to £706.3 billion in the three months to 30 September 2023, from £782.8 billion as of 30 June 2023.

The UK's current account balance is a measure of the country's balance of payments with the rest of the world in trade, primary income and secondary income.

The underlying UK current account deficit excluding precious metals contracted to £19.1 billion, or 2.8% of gross domestic product (GDP), in Quarter 3 (July to Sept) 2023. This is a change of £9.1 billion from the previous quarter, when the deficit of £28.2 billion equated to 4.2% of GDP.

Table 1 summarises the latest current account data for Quarter 3 2023.

Trade

The total trade deficit decreased from £11.8 billion (1.7% of GDP) in Quarter 2 (Apr to Jun) 2023 to £7.1 billion (1.0% of GDP) in Quarter 3 2023. The trade in goods deficit decreased by £4.1 billion from the previous quarter to £46.2 billion, or 6.7% of GDP, while the trade in services surplus rose by £0.7 billion to £39.1 billion, or 5.7% of GDP.

Figure 3: Both imports and exports of goods fell in Quarter 3 2023

Changes in imports and exports of goods, excluding unspecified goods, £ billion, Quarter 3 (July to Sept) 2023 compared with Quarter 2 (Apr to June) 2023

Notes:

1. Caution should be taken when interpreting these data as HM Revenue and Customs (HMRC) data collection changes following EU exit have affected statistics on UK trade in goods with the EU. Our Impact of trade in goods data collection changes on UK trade statistics articles provide more detail. 

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The trade in goods deficit decreased to £46.2 billion in Quarter 3 2023 as the value of imports and exports both fell.

Goods imports fell by £7.5 billion to £138.5 billion. The largest falls were recorded in imports of finished manufactured goods, which decreased by £3.8 billion, and semi-manufactured goods, which decreased by £2.4 billion. These decreases were partially offset by an increase to imports of oil (£0.9 billion).

Goods exports decreased by £3.5 billion to £92.3 billion as exports of finished manufactured goods, which include machinery and transport equipment, decreased by £1.5 billion compared with the previous quarter.

The trade in services surplus increased by £0.7 billion to £39.1 billion in Quarter 3 2023, this was the result of exports increasing by £2.4 billion, partially offset by imports increasing by £1.7 billion. The largest increase was exports of other business services, which increased by £1.8 billion.

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Primary income

The primary income account records income the UK receives and pays on financial and other assets, along with compensation of employees.

The primary income account deficit narrowed to £7.1 billion, or 1.0% of GDP, in Quarter 3 2023 with UK earnings (credits) increasing by £6.6 billion to £98.4 billion while UK payments (debits) increased by £2.3 billion to £105.5 billion.

The UK earnings on portfolio investment (credits) increased by £1.7 billion to £19.9 billion in Quarter 3, while payments to foreign investors (debits) decreased by £1.6 billion to £34.0 billion.

Within other investment, earnings on both credits (£41.3 billion) and debits (£49.2 billion) continued to increase, mainly influenced by interest rates, and were the largest quarterly credits and debits since 2008.

Secondary income

The secondary income account shows current transfers between residents and non-residents.

The secondary income deficit remained unchanged at 0.7% of GDP (£5.0 billion) in Quarter 3 2023.

A current account deficit, which the UK has experienced each year since 1984, places the UK as a net borrower with the rest of the world, indicating that overall expenditure in the UK exceeds national income. The UK must attract net financial inflows to finance its current (and capital) account deficit. This can be achieved through either disposing of overseas assets to overseas investors or accruing liabilities with the rest of the world.

The financial account recorded a net inflow of £20.8 billion in Quarter 3 (July to Sept) 2023, having recorded a net inflow of £26.1 billion in Quarter 2 (April to June) 2023.

Net acquisition of foreign assets held by the UK (a financial outflow) increased by £97.5 billion in Quarter 3 2023. This was mostly because of UK monetary financial institutions (banks) and other financial institutions extending loans abroad and other UK residents increasing their deposits overseas.

Net incurrence of UK assets held by the rest of the world (a financial inflow) increased by £118.3 billion in Quarter 3 2023 as non-residents increased deposits in foreign currency and extended their loans in the UK and continued to invest in debt securities (bonds).

Further details are available in our Quarterly Economic Commentary.

The international investment position (IIP) examines the UK's balance sheet with the rest of the world, measuring the difference between the net stock of assets and liabilities at a point in time which we report as the last day of each quarter.

The IIP net liability position narrowed to £706.3 billion at the end of Quarter 3 (30 September) 2023 from £782.8 billion at the end of Quarter 2 (30 June) 2023 as the value of the stock of UK assets increased more than the value of the stock UK liabilities.

The UK asset position increased by £466.2 billion in the three months to 30 September 2023 when it was valued at £13,746.2 billion. The value of the UK liability position with the rest of the world increased by £389.7 billion to £14,452.5 billion.

Balance of payments

The balance of payments is a statistical statement that summarises transactions between residents and non-residents during a period. It consists of the current account, capital account and financial account.

Current account

The current account is made up of the trade in goods and services account, the primary income account and the secondary income account. The difference in the monetary value of these accounts is known as the current account balance. A current account balance is in surplus if overall credits exceed debits, and it is in deficit if overall debits exceed credits.

Capital account

The capital account has two components: capital transfers and the acquisition (purchase) or disposal (sale) of non-produced, non-financial assets.

Capital transfers are those involving transfers of ownership of fixed assets, transfers of funds associated with the acquisition or disposal of fixed assets, and cancellation of liabilities by creditors without any counterparts being received in return. The sale or purchase of non-produced, non-financial assets covers intangibles such as patents, copyrights, franchises, leases and other transferable contracts, and goodwill.

Financial account

The financial account covers transactions that result in a change of ownership of financial assets and liabilities between UK residents and non-residents. For example, the acquisitions and disposals of foreign shares by UK residents. The accounts are presented by the functional categories of direct investment, portfolio investment, other investment, financial derivatives and reserve assets.

International investment position

The international investment position (IIP) is a statement that shows at the end of the period the value and composition of UK external assets (foreign assets owned by UK residents) and identified UK external liabilities (UK assets owned by foreign residents). The framework of international accounts sets out that the IIP is also presented by functional category, consistent with primary income and the financial account.

Precious metals

In line with international standards, the Office for National Statistics (ONS) publishes trade statistics that contain the UK’s exports and imports of non-monetary gold. This trade can have a large effect on the size of and change in the UK’s headline trade figures, because a substantial amount of the world’s trade in non-monetary gold takes place on the London markets. As a result, we exclude non-monetary gold from our headline estimates (unless otherwise stated).

Further information on precious metals and their impact can be found in our UK trade bulletin.

Special drawing rights

Some International Monetary Fund (IMF) member countries have access to international reserve assets called special drawing rights (SDRs). A general allocation of SDRs, equivalent to approximately US $650 billion, became effective on 23 August 2021 and was allocated to participant countries in proportion to their existing quotas. The UK's SDR allocation was equivalent to $19,318 million and was received in August 2021.

Net errors and omissions

Although the balance of payments accounts are, in principle, balanced, imbalances between the current, capital and financial accounts arise from imperfections in source data and compilation in practice. This imbalance, a usual feature of balance of payments data, is labelled "net errors and omissions."

For more detailed definitions of terms used in the balance of payments, see our glossary (PDF, 123KB).

Data sources

Balance of payments statistics are compiled from a variety of sources, produced in the national accounts sector and financial accounts (SFA) framework. Some of the main sources used in the compilation include:

• overseas trade statistics (HM Revenue and Customs (HMRC)

• International Trade in Services Survey (ITIS) (Office for National Statistics (ONS)

• International Passenger Survey (ONS); this was suspended between March 2020 and January 2021 because of coronavirus (COVID-19)

• Foreign Direct Investment Survey (ONS and Bank of England (BoE)

• various financial inquiries (ONS and BoE)

• Ownership of UK Quoted Shares Survey (ONS)

Trade is measured through both exports and imports of goods and services. Data are supplied by over 30 sources, including several administrative sources, with HMRC being the largest for trade in goods. ITIS, conducted by the ONS, is the largest single data source for trade in services.

The main source of information for UK foreign direct investment (FDI) statistics is the Annual FDI Survey; separate surveys are used to collect data on inward and outward FDI. This is combined with data from the BoE on the banking sector. The statistics in this bulletin are compiled using the asset and liability measurement principle, which uses residency as the main distinction between outward and inward investments.

Because of technical issues relating to the foreign direct investment survey, there is more uncertainty around the foreign direct investment estimates (FDI) for Quarter 3 2023 in this publication. As such, we have not included our FDI annual benchmark data for 2022 or updated quarterly survey data for 2023 quarters. Users should be cautious when interpreting Quarter 3 2023 FDI data that are part of balance of payments (BoP) statistics.

Changes affecting UK trade statistics

EU imports and exports of goods

In January 2022, HM Revenue and Customs (HMRC) implemented a data collection change affecting data on imports from the EU to Great Britain. This followed a similar data collection change in January 2021 for data on exports of goods to the EU from Great Britain.

Staged Customs Controls

In 2021, the use of Staged Customs Controls (SCC) allowed customs declarations to be reported up to 175 days after the date of import for imports of non-controlled goods from the EU to Great Britain. The UK government introduced full customs controls in January 2022, while July 2022 marked the first full month of data where delayed customs declarations submitted under SCC could not be included. Temporary arrangements still apply for imports of goods from Ireland to Great Britain.

To account for the impact of SCC, we have applied adjustments to our estimates of goods imports from the EU for the period January to June 2022. Details are provided in our Impact of trade in goods data collection changes on UK trade statistics: adjustments to 2022 EU imports estimates article, which provides a detailed breakdown of the impact of these adjustments.

EU exports in Quarter 1 2022

An operational change implemented by HMRC in January 2022 resulted in a break in the data time series for UK exports to the EU. Although this change does not affect data for March and future months, caution should be taken when interpreting Quarter 1 (Jan to Mar) 2022 data or any periods that include January 2022 data.

Quality and methodology

More quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in our Balance of payments QMI.

We will continue to produce our UK balance of payments statistics in line with the UK Statistics Authority's Code of Practice for Statistics and in accordance with internationally agreed statistical guidance and standards. This is based on the International Monetary Fund's (IMF's) Balance of Payments Manual sixth edition (BPM6) (PDF, 3.0MB), until those standards are updated.